Innovate: next steps

Find out what we have achieved so far with Innovate and how we are expanding our supporting teams.

Innovate went live at the FCA in October 2014. Our aim is to make sure that:

We encourage innovation in the interests of consumers.

We promote competition through disruptive innovation − innovation that offers new services to customers and challenges existing business models.

To do this we engage constructively with innovative businesses, and seek to remove unnecessary barriers to innovation.

So far we have pursued our aim in two main ways:

The Innovation Hub helps innovative businesses gain access to fast, frank feedback on the regulatory implications of their concepts, plans, and choices.

We have tackled structural issues that innovators told us impede the progress of their propositions towards the market.

The foundations have been laid. We have helped over 350 innovative businesses, and more than 25 have now applied for FCA authorisation.

A firm wanted to set up a one-stop lending market for corporations and investors. Their platform is designed to allow investors to invest directly in corporations that need capital, and cut out the middlemen.

We helped the firm understand the regulatory landscape and gave them an informal steer about our rules. This helped them position their business as an appointed representative so that they were able to bring their product to market sooner. When they pitched their start-up story at an accelerator demo day, they cited the Innovation Hub as part of their success story.

We have introduced some changes to help innovators progress their propositions:

Our use of ‘informal steers’ has freed up communication.

We have worked with the government on its plans to introduce regulation for digital currencies.

We made a statement on disproportionate de-risking that denies businesses access to banking facilities.

But the longer term success of Innovate hinges on its contribution to the shape of financial services markets. We need sharper competition to deliver to financial consumers better value for money and higher quality interactions with financial services providers. And to sharpen competition, we need to encourage innovative solutions from market entrants and incumbent financial institutions. Innovate’s task is to foster these developments.

To bring that about, we are going to broaden and strengthen Innovate in several ways.

Advancing Innovate: the next steps

Strengthening Innovate will increase the value of its longer term contribution, not only from the perspective of our competition objective, but also from the viewpoint of innovative businesses:

New market entrants: an end-to-end experience. From October 2015 businesses that have received initial support from the Hub have their applications for authorisation handled by a specialised Innovate authorisation process. After authorisation we enable the provision of dedicated supervisory support, normally for one year. This ensures delivery of a a seamless experience of regulatory processes for the businesses concerned, and minimises the risk of unnecessary delay. We must stress, though, that a business benefiting from initial support may or may not pass the tests for authorisation; in deciding whether to allocate initial resource, we make no judgment about whether the business will ultimately meet the relevant conditions for authorisation.

International engagement. Part of the mission for Innovate is to build disruptive innovators at scale. The UK attracts FinTech innovators from around the world. In many cases they base themselves here, not only to become part of a vibrant local ecosystem, but also because they hope that the UK will be a springboard from which they can launch their businesses or products internationally, making them potentially more sustainable challengers. We are:

Extending the remit of the Innovation Hub to the promotion of pro-innovation regulatory solutions to international standard-setters.

Helping to put UK-based innovative businesses in touch with the right regulators when they seek to start doing business in other regulatory jurisdictions.

Seeking memorandums of understanding with key regulators on this matter.

Ready to give help to non-UK innovators interested in entering the UK market.

Engagement with large incumbent institutions. Innovate is always aimed at businesses of all shapes and sizes seeking to innovate in the interests of consumers. But still need to build engagement with large, incumbent businesses. This is a missed opportunity for them, particularly if they hold back on initiatives because of apprehension or uncertainty about the regulatory environment, as well as for us (since it limits our impact). We are therefore building and executing a programme of proactive engagement with large incumbents, to make sure their potential for consumer-friendly innovation is not being held back by regulatory considerations. In particular, we are seeking out opportunities to conduct pilot research on new initiatives.

Our initiatives

Conclusion

We want to capitalise on the initial success of Innovate to ensure we maximise its contribution to innovation that benefits financial consumers, and advances our competition mandate. We believe the enhancements summarised here will serve those ends, and we will continue to look for other ways of making Innovate as useful as possible.

Whether you want to know more about Innovate, want to request support or have a question about an application for authorisation or a variation of permission, you can contact us at: